Budget Represents Historic Opportunity to Build Economy and Society For All

Tuesday, 7 March, 2017

Tomorrow’s Budget sees the Government arriving at a crossroads. Even with the difficulties that Brexit entails, and the monumental resources that will need to be applied to it, there are still two clear paths down which the Chancellor can steer us, should he choose. The first is more of the same, with planned cuts to social security and tax cuts for the richest estates and incomes. The second is an approach that genuinely meets the Government’s promise for an economy and society for all.

Only last week the IFS warned in its Green Budget that changes expected in tomorrow’s Budget would see an increase in inequality, with the incomes of some the poorest households “pummelled” according to Ben Chu at The Independent. This followed similar warnings from the Resolution Foundation, with claims that our current path would see inequality return to record levels.

Little of this sounds like an economy where everyone is benefitting, so what can be done? The first step the Government must take is to halt its planned tax cuts for the wealthiest households. For example, the expected increase in the inheritance tax threshold will benefit only the richest 5% or so of estates, to the tune of £1bn. This is policy that seems almost designed to increase inequality, and one the Government must reject.

The second step the Government must take is to reverse cuts to social security. If the planned rollout of cuts goes ahead, a further £12bn will be hacked away from the safety net protecting poorer households. This is a huge hit to families struggling to afford the basics of a roof over their heads and food on the table. As our research from earlier this year proved, many households moving onto Universal Credit will keep barely a quarter of their additional earnings on the new system. Rather than continuing to increase the personal allowance, which disproportionately benefits better-off households (and doesn’t help the poorest at all), the Government should instead reduce the withdrawal rate on Universal Credit from 63p to 55p. An economy for all requires poorer households to keep more of the money they earn.

A third step would be to shelve some of the more misguided policies that have been trailed this week, not least the planned expansion of selective schools. There is a wealth of evidence showing that selective education fails to increase social mobility or reduce inequality. Far from pulling up talented but poor children, selective schools are overwhelmingly filled with the children of the richest who have been tutored to pass the test. Children currently attending selective state schools are four or five times more likely to come from independent prep schools than they are from the most disadvantaged backgrounds. “Inclusive selective education” is a contradiction in terms, and the allocation of £320 million towards such schools would be wasteful and counterproductive.

If the Budget continues as planned, millionaires and the very well-off will be understandably delighted, but an ‘economy for us all’ cannot be built while those at the bottom slip further and further behind.